Chief Executive Officer's Statement

Market recognition of our technology's ability to act as an enabler for new applications continues to gain momentum. Focussing on sizable new applications, such as EV battery coating, automotive coating and desktop 3D printing, where the incumbent solution is either technologically limited, too expensive or too inefficient, represents the main medium-term revenue opportunity, with each avenue for growth showing strategic progress.

In the near-term, the jewellery wax market, another of our key focus areas, highlights the disruptive and rapid scaling potential of our technology. From a standing start in 2023, we now supply printheads to four of the five largest players and we expect to have secured substantial share by the year end. With the opportunities within our other key markets progressing well, the wax success illustrates the expected commercial ramp up once we have leading participants adopting our technology.

The  weak performance of EPS has resulted in a Group performance headwind partially offsetting the revenue growth from new Printhead business which is defined as revenue generated from the sale of printheads used in OEM products that have been launched since 2019. However, with 96% printhead new business revenue growth year-on-year, and a CAGR of 26% since 2019, new printhead products now account for 49% of divisional revenue. The increased diversification of the business, compared to historic overreliance on the ceramics market, ensures that the foundations for the future are well set.  

Financial Highlights

During the first half of 2025, we delivered 7% revenue growth to £27.2 million (H1 2024: £25.5 million) against a period of heightened global market uncertainty given the dynamics in the US. Printhead revenue grew £3.4 million, 20% year-on-year, bolstered by significant revenue growth within the jewellery wax market with £3.3 million of revenue up from £0.6 million in H1 2024. Printhead revenues also benefited from decreasing instability in the ceramics market; the Ceramics and Glass segment generated £3.6 million of revenue in H1 2025 (H1 2024: £3.8 million). Continued momentum in our new printhead business alongside the reduced headwind from ceramics bodes well for the future of the business.

Revenue for EPS fell £1.2 million to £6.3 million (H1 2024: £7.5 million), with the previous period benefitting from a multi-year, multi-unit order from a single customer and market uncertainty continuing to delay the rate of new customers switching from analogue to digital. However, under new management, the order book is being rebuilt which should translate to revenue growth in 2026.

Megnajet has also been impacted by a weaker capital investment environment caused by higher uncertainty as revenue decreased £0.2 million to £1.1 million (H1 2024 £1.3 million).

We continue to make operational efficiency savings, with gross margin remaining stable at 37% and operating expenses remaining broadly flat.

The Group continues to retain a strong balance sheet, with a net cash position at period end of £5.1 million, down 38% from £8.2 million at the end of 2024, partly as a result of ongoing investment in capital equipment and capitalised R&D spend. This expenditure is driven by our commitment to develop cutting edge, unique technology which will open up new opportunities for Xaar in the future. While we remain focussed on delivering the opportunities in front of us, and will utilise cash accordingly, we will continue to invest for the long-term benefit of the Group.

Strategic Update

The almost universal acceptance and adoption of our technology in the jewellery wax market is a significant milestone for Xaar, providing the strongest evidence yet that our technology can be transformative in end markets, once adopted. When the first major OEM launched a product using our printheads, competitors were compelled to rapidly launch similar products to match the performance that our printheads deliver. As a result, we have progressed from zero to significant market share within two years.

Elsewhere, progress within the major opportunities of EV battery coating, automotive coating and desktop 3D printing markets remains encouraging and in line with our expectations. These markets each have substantial long term and repeat revenue potential and are central to the strategic growth ambitions of the Company. As we become increasingly embedded with our customers, with our technology playing a key role in their market share aspirations, the durability of our revenue is enhanced.

With additional opportunities in markets such as textiles and corrugate, as well as the potential for a cyclical recovery in ceramics, our product portfolio has much more diversity in end markets and customers than it has ever had, providing both revenue growth optionality and a more resilient and stable foundation going forward. By focussing on applications where our printheads are opening up new markets or revolutionising the existing market, rather than competing on price and quality alone, we can take significant share across several substantial markets in the medium-term.

Printhead

EV Battery Coating opportunity

The problem we solve: New 800-volt battery technology, which incorporates faster charging times, increases heat generation which can be incompatible with current battery coating techniques. This is the primary issue with the incumbent solution, which utilises a plastic wrap to insulate batteries. Using spray painting to insulate the battery overcomes this drawback. However, with c.40% of paint being lost in the process, this requires a paint recovery system which generates incremental costs, severely limiting its uptake with EV battery manufacturers. As demand for higher voltage EV batteries increases, so does the demand for a high-yield, low-cost solution that eliminates the risk of air bubbles caused through delamination of plastic film technology, has greater rub resistance and peel strength whilst also being fire retardant with higher thermal properties.

Storage batteries provide a further incremental opportunity for Xaar as these also have a coating requirement and customers in this market face the same issues as EV manufacturers.

The Xaar solution: Inkjet coated EV batteries, as enabled by Xaar technology, can withstand far greater levels of heat than plastic wrapping and have a significantly higher yield than spray painting, meaning minimal waste with no need for a costly paint recovery system. As well as addressing safety concerns, research has shown that switching from the incumbent film technology to inkjet substantially reduces cost per unit.

The maturity of the opportunity: A year ago we launched two new printheads, the Xaar eX and Nitrox eX, specifically designed to print a coating solution that meets the necessary safety tests for the insulation of the new generation of batteries used in EVs and energy storage systems.

We have worked with Shifang, a leader in EV battery production automation, Omijia Intelligent Technology, and Sokan New Materials Group, to launch their own inkjet battery coating lines. These OEMs provide lines to the leading battery manufacturers meaning that our technology is on the cusp of becoming a critical part of an expanding industry.

Our product offering has been in the market for nine months now and this year will generate single-digit million revenue from existing orders, with all three OEM's signalling their intent to ramp up order volumes in the near future. As such, we are well positioned to signficantly grow printhead sales as confidence in inkjet coating technology increases.

The market potential: We are the leading provider of this technology with others unable to handle the viscosity of fluids that are required for this application. There are an estimated 1,300 EV battery production lines in China and we expect this number to increase as demand for EV's and battery storage continues to grow. To scale this opportunity for Xaar, converting just the existing market could generate over a hundred million pounds of initial revenue over a number of years and with an estimated printhead replacement cycle of two to three years, we anticipate healthy repeat revenue once our technology has been installed.

Automotive Coating opportunity

The problem we solve: Today the only solution to using graphics on a car is either through extremely expensive hand painting or the use of decals. Decals can quickly appear dirty around the edges and are prone to jet wash damage which has historically limited their appeal.

In addition, as a potentially secondary opportunity in the more medium term, if manufacturers want to use several colours on their vehicles, even something as apparently simple as a different colour roof, it is an extremely inefficient process. Here, the current process requires cars to be taken off the production line then masked and sprayed prior to the application of every additional colour. This is inefficient in terms of both materials and energy with c.40% of paint lost when spray painting.

The Xaar solution: With a focus on graphic applications, and the replacement and expansion of the existing "decal" market, Xaar technology enables high viscosity ink to be applied on the production line on any angle of surface, providing a high-quality, high value solution with no risk of damage. As such, last year Axalta and Dürr announced a partnership to provide a digital graphic solution utilising Xaar printheads and combining Axalta's coating technology with Dürr's robotics.

The maturity of the opportunity: Dürr, whose machines currently paint 50% of cars globally, have demonstrated this technology to potential customers and are in the process of choosing go-to-market partners. During the second quarter of 2025, they received their first inbound request to quote from a luxury car manufacturer, an important milestone indicating demand for our technology. We currently estimate that the first installations will be in the second half of 2026. The exact timing of when this opportunity will start to deliver sizeable revenue remains uncertain due to the unpredictability of when the car industry decides to adapt this new technology.

The market potential: Our technology could drastically expand capability for customers or brands to customise vehicles beyond what is available today. As such, exact demand levels are difficult to predict, however, it is likely to be considerably greater than existing demand for traditional decal solutions given its limitations.

Currently only c.1% of the 90 million cars produced globally have decals or two-tone paint. As the current sole provider of this new technology, we have the potential to take 100% of the market. Unlike our traditional model of generating revenue directly from selling printheads, Xaar will receive revenue based on the number of cars painted. We anticipate the size of this market will grow as our technology unlocks new uses for decals. Therefore, every 1% of the global car market, or 900,000 cars annually that are painted using our technology, would generate significant revenue at attractive margins for Xaar.

Desktop 3D Printing opportunity

The problem we solve: Historically there has been an absence of a low-cost, high-quality, full colour-enabled product. Consumers had a choice between cheap single nozzle, monochrome, 3D printers or high-quality, full colour 3D printers which can cost in excess of £50,000. Accessibility to high quality 3D printers was therefore restricted to real enthusiasts willing to pay for a premium product.

The Xaar solution: By utilising Xaar technology and jetting high viscosity fluids, cost as a barrier to high-quality 3D printing, has been substantially reduced. In November 2024, our technology enabled Flashforge, a major global supplier of desktop 3D systems, to launch the world's first full colour high resolution desktop 3D printer with keen pricing aimed at opening up the consumer market.

Of note, earlier this year, an OEM launched a 2.5D full colour printer at a similar price point to the Flashforge system. The overwhelmingly positive reaction to this launch, with sales a multiple of that initially expected, has served to reinforce belief in the market potential for a high quality full colour 3D printer. Flashforge have observed how their competitor launched their product and are currently implementing key lessons with a modified go-to-market strategy.

The maturity of the opportunity: Flashforge have been marketing their desktop 3D printer for an extended period and we anticipate that they will start to sell their printers around year-end, with a more direct go-to-market strategy than initially envisaged given peer success.

The market potential: As the cost of purchasing a high-quality desktop 3D printer falls over the medium term, we would expect demand to grow beyond the current levels of one million units sold annually. Conversion of just 1% of the existing market will generate Xaar multi-million-pounds of revenue with each machine generating reoccurring revenue as the printheads are designed for regular replacement.

Summary of the key future revenue drivers

Overall, these three markets each represent significant revenue opportunities, illustrating the progress we have made to de-risk our business over a relatively short period of time. In the first half of 2025, progress in all three markets has remained on schedule and demand for our printheads continues to grow.

Other Market opportunities

Jewellery wax market: We now supply printheads to four of the five biggest OEMs in the market and we expect to take a majority share of the market by year-end. Most recently, in April 2025, Flashforge launched the Waxjet 530, a three-headed machine to go alongside the Waxjet 510, a single headed machine, which launched last year, and demand for the Waxjet 530 has been almost double than anticipated. On top of this, we have started the multi-year process to develop a printhead that will enable access to an adjacent market which has more than double the revenue potential than the current opportunity.

Textiles and Corrugates: Our technology enables consistently clean, high-quality printing on a wide range of garments. Following a successful launch with M&R utilising our Aquinox printhead in a textile application, we remain committed to the opportunity to broaden our offering to additional OEMs. The potential market opportunity is roughly £20 million per annum and we anticipate taking significant market share in the medium term.

Enhanced go-to-market strategy

The capability of OEMs to integrate our printheads into their existing print machines varies materially. The challenges of working with high viscosity fluids can be considerable, with clients, on occasion, withdrawing from the development process due to the apparent complexity of the process. To get around this, in some markets we have been changing our go-to-market strategy to focus on turnkey solutions that offer potential customers the printhead with the associated ink system. The critical advantage of a turnkey solution is a significantly reduced timeline from point of engagement to a Xaar embedded solution being fully operational and available for customers to purchase.

After the success of the project in collaboration with M&R last year, which saw their product launched in early September after just six months, our go-to-market strategy has been validated. However, the near-term focus remains on executing on the opportunities within EV battery, automotive coating and desktop 3D, as well as the jewellery wax market in the immediate future.  

Operations

The capability to increase operational capacity and output in line with anticipated increases in demand, without the need for significant capital investment, ensures we are well set for the growth we see before us. On a smaller scale, our ability to ramp-up in line with demand was proven as we met the stronger than anticipated demand for Xaar 2002 printheads post the successful launch of the Flashforge 530 Waxjet in April 2025; delivering in H1 the number of printheads forecast for FY25 in total on schedule. Further to this, we have begun to add headcount in key areas in anticipation of growing demand for our printheads.  

Last year we successfully relocated print systems manufacturing from Hemel Hempstead to Huntingdon as part of our continued effort to facilitate greater collaboration. This enables us to understand integration issues and provide functioning solutions to our OEMs faster, making it easier for OEMs to utilise our technology, ultimately allowing us to sell more printheads.

Megnajet

Megnajet continues to play an important role in helping OEMs utilise our printheads and we are in the process of further integrating Megnajet with our Printhead business.  

We have built a new ink delivery system production facility in China to expand our ability to support local OEMs with the products they need. Historically, we have been unable to sell any ink systems in China as the cost of UK manufactured ink systems was too high for the domestic market. This facility helps us to support our customers with the hardware they need at the right price, therefore removing another hurdle to the adoption of our printheads in China.  

Engineered Print Systems

EPS remains largely separate to the rest of our business with a distinct strategy and business model, utilising both Xaar and competitor printheads. Amidst a difficult market backdrop, worsened by the introduction of tariffs, we have taken steps to strengthen the leadership of this business to focus on a return to growth. Going forward, our focus will be on strengthening the customer pipeline while optimising the supply chain to reduce the effects of higher input costs. The benefits of these actions should be delivered in the next financial year.

Sustainability

We remain focussed on delivering our roadmap and helping our customers become more sustainable by using our printheads which need less ink, require less time to dry and consume less energy. Our research shows that, compared to analogue alternatives, digital has a significant impact in reducing energy consumption (by as much as 55%), water consumption (by up to 60%) and CO² emissions (by up to 95%).

After the relaunch of our roadmap in April 2025, we are currently focussing on developing the necessary action plans that will ensure we meet our targets as planned. Our 2024 ESG report provides further detail of our programme, including progress against each of our pillars.

Outlook

Our expectations for 2025 remain unchanged despite the additional uncertainty brought by the introduction of tariffs and the continuation of challenging trading conditions reported in March 2025.  Our strength is our attractive value proposition centred around the ability to jet highly viscous liquids.

We continue to anticipate that revenue will be second half weighted with order volumes expected to grow steadily throughout the year and into FY26. Printhead revenue is expected to be strong in the second half, whilst in EPS, the tariff induced end market slowdown is expected to continue to impact revenue and profit whilst the pipeline is being rebuilt. 

Notwithstanding the uncertainties of the global geopolitical environment and tariffs, our financial performance will be driven by the maturing of recent product launches and the exact timing of new ones. Management remains confident of meeting current expectations.

It also remains our strong belief that in the medium term, our focus growth areas will deliver meaningful revenue at attractive margins. 

Business Performance

Revenue

Group revenue growth

¹Prior year numbers restated to reflect continuing operations post the disposal of FFEI Life Science business

Revenue for the Group was £27.2 million (H1 2024: £25.5 million) for the first half of the year, representing year-on-year growth of £1.7 million, up 7%. Growth is reflective of strong Printhead new business revenue growth as well as relative stability in our Ceramics and Glass product offering, which has been in decline and acting as a headwind to Group growth for a number of years. In total, revenue from the Printhead business grew by £3.4 million, largely due to demand for our jewellery wax printheads which generated £3.3 million of revenue in H1, up from £0.6 million in the first half of 2024.

FFEI revenue in H1 2024 is for the Digital Print part of that business which is continued within the Printhead business unit in 2025.

EPS revenue fell 16% to £6.3 million amidst tough market conditions driven by tariff uncertainty in the US market affecting capital investment decisions in the customer base and the completion of a substantial multi-year project in FY24.

Megnajet revenue was down year-on-year to £1.1 million (H1 2024: £1.3 million) as the uncertainty caused by tariffs has slowed down capital investment decisions.

Printhead

Revenue by Sector

¹Note that 2024 sector revenues have been restated following a review of allocations for FY24 results

Xaar offers a wide range of industrial inkjet printheads which are designed and produced to meet customer-driven requirements in markets including EV battery coating, automotive coating, 3D printing, jewellery wax, textiles, graphics, packaging, and additive manufacturing.

Printhead revenue increased by 20%, to £19.9 million for H1 2025 (H1 2024: £16.5 million). The Coding & Marking (C&M) and Direct-to-Shape sector revenue grew £0.7 million to £7.1 million, primarily due to revenue generated from the EV battery coating market. 3D Printing and Advanced Manufacturing grew 91% due to the significant growth in the jewellery wax market. Packaging and Textiles, was up 160% to £1.3 million in H1, largely due to the M&R partnership launched in September 2024. The decline in revenue from Ceramics and Glass has begun to stabilise to £3.6 million compared to £3.8 million in H1 2024, supported by a new agreement with a key customer. We anticipate that revenue from this sector is near its trough, eliminating a persistent headwind for the Group. Revenue excluding Ceramics and Glass increased by 28%, to £16.3 million (H1 2024: £12.7 million).

Overall, as we grow revenue, we are also growing market share through entry into new markets. This supports our confidence that as more of our technology becomes embedded in our target end markets, the Printhead business will deliver strong and sustainable growth.

Engineered Print Systems

EPS manufactures a range of highly customised product print systems, printing a variety of industrial and promotional objects such as tools, appliances, sports equipment, medical equipment and toys. The business is split between digital inkjet machine sales (H1 2025: 52% of revenue), pad printing sales (H1 2025: 40% of revenue) and servicing (H1 2025: 8% of revenue).

Revenue from EPS fell by £1.2 million to £6.3 million (H1 2024: £7.5 million). This has been driven by a £1.4m fall in sales of digital inkjet to £3.2 million (H1 2024: £4.6 million), driven in part by the global uncertainty that US tariffs brought - causing customers to delay capital investment decisions. Pad printing remains flat at £2.5 million. Servicing continues to be a positive contributor to growth as customers look to extend the lifespan of machinery, with revenue up 47% to £0.5 million.

Megnajet

Megnajet specialises in the design and manufacture of industrial fluid management systems for digital inkjet with the most integrated and compact ink systems in the market today.

Megnajet delivered £1.1 million of external revenue, a 19% reduction year-on-year due to the ongoing delay of capital equipment investment caused by higher uncertainty. Within Megnajet, our main focus is on Group projects, with a 133% uplift in intra-group transactions with Xaar and EPS remaining two of Megnajet's biggest customers. Overall, we remain satisfied with the performance of this business as it contributes to the strategic progress of the Group.

Gross profit

Gross profit increased by £0.4 million to £9.9 million (H1 2024: £9.5 million) with gross margin remaining stable at 36.5% (H1 2024: 37.4%) on increased revenue.

Printhead gross margin decreased by 350 basis points year-on-year driven by sales mix and a strategic decision to secure market share in the ceramics segment in anticipation of its recovery. Within EPS, gross margin improved by 350 basis points due to cost savings achieved by the new management team including proactive supply chain management. Megnajet gross margin fell by 480 basis points due to a reduction in externally sold volumes and lower overhead absorption.

Research & Development

Gross R&D was £2.0m in the first half, and at c7% of revenue was in line with the prior year. We are continuing to invest in the business for both the short and long-term benefit. We remain focussed on helping OEM companies integrate our technology into their machines whilst remaining at the forefront of innovation.

Operating Expenses

Whilst we have continued to face inflationary headwinds in areas such as raw material and energy costs, we have been successful in our efforts to manage operating expenditure across the Group. The sales and marketing expense for the period was £2.3 million (H1 2024: £2.5 million) reflecting the continued focus on cost management across both salaries and travel expense. General and administrative expenses increased to £6.2 million from £5.5 million (restated) in H1 2024, reflecting small headcount growth, inflationary salary increases and extra IP and legal costs.

Profit for the year

Adjusted loss before tax was at a similar level to the prior period at £(0.7) million (H1 2024: £(0.6) million). All business units continue to generate profit although in the period this was offset by broadly stable head office costs at £3.1 million (H1 2024 £3.0 million).

In calculating the adjusted profit before tax, we have adjusted for fair value losses on financial assets of £0.4 million (H1 2024: £0.2 million) alongside restructuring costs of £0.7 million (H1 2024: £0.2 million), foreign exchange losses on intra-group loans of £0.6 million (H1 2024: nil), share-based payments of £0.4 million (H1 2024: £0.7 million), Research and development expenditure credit £0.2 million (H1 2024: nil), and amortisation of acquired intangible assets of £0.2 million (H1 2024: £0.3 million). After taking these into account, the loss before tax was £2.8 million (H1 2024: £2.0 million)

Adjusted EBITDA in the period was £0.8 million (H1 2024: £0.9 million).

Cashflow and balance sheet

The Group retains a strong balance sheet, with cash and cash equivalents at 30 June 2025 of £5.1 million, reflecting a cash outflow of £3.6 million during the period.

H1 2025 saw trade working capital fall £1.1 million to £25.4 million (FY 2024: £26.5 million). Trade receivables were flat at £8.1 million and trade creditors reduced by £0.3 million to £8.5 million (FY 2024: £8.8 million). Whilst inventory reduced by £1.4 million in the statement of financial position to £25.9 million (FY 2024: £27.2 million), £0.9 million of this has no cashflow impact as it was transferred to fixed assets to enhance demonstration capability.

Trading losses before tax from total operations of £3.3 million resulted in operating cash outflows of £0.3 million after adjusting for non-cash items. The cash impact of movements in working capital was an outflow of £0.6 million, predominantly driven by changes to creditor balances including lower contract liabilities in EPS, and drives a cash utilisation from operations of £0.9 million.

Other significant financing and investing cashflows include purchases of fixed assets £1.3 million, purchases of own shares £0.3 million, lease payments £0.8 million and a repayment of receivables finance borrowings £0.5 million.

As at 30 June 2025 there were no borrowings against receivables (FY 2024: £0.5 million borrowed) and this movement, alongside the £3.6 million gross cash reduction, resulted in a reduction in net cash from £8.2 million to £5.1 million.

The Group has a Revolving Credit Facility (RCF) of £5 million in place with our lead bank, HSBC, to ensure we have adequate resources to invest in the Group and our operational capability when required. To date the facility remains undrawn. At the beginning of the year, the term of the facility was extended by one year, to June 2026.

The business has a clear plan and strategy, supported by its healthy balance sheet and cash position. At present, we are focusing on internal investment to ensure we have the operational capacity and efficiency to meet future demand, as well as product development to ensure we remain at the forefront of the high viscosity printhead market. We remain focussed on converting market opportunities and will continue to review our approach to inventory levels, with a medium-term aim to reduce it as demand becomes more stable.

Dividend

The Board regularly reviews capital allocation and believes that prioritising investment to enable profitable growth for the business is currently the most appropriate use of capital, therefore, no interim dividend has been declared for H1 2025.

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2025

*Further information on adjusting items included in Note 3.

** Prior period figures have been restated to separately disclose discontinued operations. Refer note 12.

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2025

* Prior period figures have been restated to separately disclose discontinued operations. Refer note 12.